Market report

The only safe bet may be for more market volatility

The stock market chorus tried to follow the bouncing commodity price ball higher on Tuesday. But when commodity futures trading ended in the early afternoon, so did the stock rally.

Current market conditions are no place for the faint of heart.

In the nine trading sessions since the Dow Jones industrial average peaked on May 10, the Dow has posted solid gains, as much as 77 points on Tuesday, six times on an intraday basis.

Indeed, if investors could have locked in the Dow's intraday high for each of the nine sessions, we would not be crying in our beer. We would be celebrating the new all-time high for the Dow and betting on when the index would top 12,000.

Based on intraday highs, the Dow gained 275 points since May 10, to 11,917, topping the 11,723 record close posted on Jan. 14, 2000.

Instead, at the end of Tuesday's trading, the Dow stands down 544 points from May 10, at 11,098, and we're wondering if the 10,000 mark is in jeopardy.

To round out this hypothetical tale, if the Dow had closed at its intraday lows since May 10, the closely watched index would stand at 10,760.

Investors might have forgotten about this kind of stock market volatility. But we're in for more of the same.

One reason for the rocky road ahead is the current fixation on commodities, such as oil, gold and copper. Commodities, which have zero prospect of generating a cash return for investors, are influencing market sentiment. Companies that struggle daily to generate profits are getting no respect.

Soaring commodity prices tell an interesting story, to be sure. Optimism about global growth, especially in emerging economies such as China, is revealed in the commodity rally. But the impact of global demand for commodities on the stocks and bonds most people actually own is difficult to discern.

In the meantime, the normal translation of economic news into stock prices is being roiled by the commodity price overlay.

For example, data on new-home sales in April is expected to be announced Wednesday. Economists surveyed by Reuters forecast that sales declined to an annual rate of 1.15 million from 1.21 million in March.

The expected number is in line with the first three months of the year, as well as expected sales for the next several months. In other words, the report does not appear to be an earthshaking event. But who knows what it will mean to a gold futures trader at the London Metal Exchange?

Similarly, the government is set to issue on Thursday its revised data on economic growth in the first three months of the year. Economists expect that the initial report of 4.8 percent inflation-adjusted annual growth will be revised upward to 6 percent or more.

With the end of the second quarter just over five weeks away, the GDP revision should be regarded by active traders as old news. It won't be if the inflation statistics in the report show a surprising jump. And a growth figure much greater than 6 percent could energize that gold futures guy in London.